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Monday, July 1, 2013

Foreign retail majors ignore India invite

Even as international retail chains waiting for years to open stores in the country are not in a hurry to file their applications, those watching from outside are hesitant too to make any move. In a telling signal of how foreign investors are looking at India, at least six major foreign retailers failed to turn up at a crucial meeting on multi-brand policy called by commerce and industry minister Anand Sharma last Thursday, it is learnt. Also, many top international chains setting up sourcing offices in India are not planning to set up stores in the country any time soon, they have said. Policy uncertainties even months after 51% foreign investment was allowed in multi-brand retail sector are keeping the international players away, say experts.

While representatives of international chains such as Walmart, Tesco, Carrefour, who are already operating wholesale/cash and carry business or providing backend support to retailers in India, attended the roundtable, American chains like grocery group The Kroger Company, Costco Wholesale Corporation, drug retailing company Walgreens, and home improvement player The Home Depot did not show up though they were part of the invitee list. Two German supermarket chains, Schwarz and Aldi, too were called at the meeting but preferred to stay away.

When contacted, Walgreens spokesperson Vivika Panagiotakakos said, “we don’t have any record of receiving an invitation to the event,” explaining why the company did not participate. On whether the largest drug retailing chain of America was keen to enter India, the spokeperson said, “while we are positioned for international expansion with our Alliance Boots partnership and long-term relationship with AmerisourceBergen, we currently don’t have specific international plans…” With its shares traded on NYSE and Nasdaq, the $71-billion Walgreens runs over 8,000 drugstores in America.

The NYSE-listed $70-billion Home Depot said the company was not in a position to attend the meeting with Sharma “due to scheduling”. On the likelihood of setting up shop in India, Meghan King, the spokesperson of Home Depot, told Business Standard, “we never speculate on entering new retail markets and have no additional information at this time.” But, it is believed that Home Depot is not looking at India at this point.

Others including Costco, Krogers, Schwarz and Aldi did not reply to this newspaper’s queries on their interest in the India market and their participation in the retail policy talks with the government.

Meanwhile, UK-based 22-billion pounds supermarket chain Sainsbury’s, which recently got the government approval to open its India sourcing office at Gurgaon, does not have any plans to set up retail stores in the country. Sainsbury’s spokesperson said, “we have no plans to open stores in India as we are continuing to focus on growing our business in the UK.” Apart from India, Sainsbury’s has sourcing offices in China, Hong Kong and Bangladesh.

Migros, Switzerland’s biggest retailing company with revenues of over 24 billion Swiss Francs, too will have a sourcing office in India. Monika Weibel, spokesperson of Migros, said, “the group is buying in Asia numerous products. For this reason, we have an office in Hong Kong, Shanghai and now we are in the process to open up an office also in Delhi.” Migros sources textiles, rice, spices, decoration items of an estimated value of $50 million from India. While pointing out that sourcing from India would be stepped up, Weibel said, there were no plans to bring the Migros brand to India in terms of setting up stores in the country.

Officials in the Department of Industrial Policy and Promotion (DIPP), however, are optimistic that setting up sourcing office was the first step towards getting into retail stores in the country. “They are testing the market through the sourcing base,” an official said.

According to an industry representative, years before the likes of Walmart, Metro and Carrefour decided to open cash and carry stores in India, they have had their sourcing offices in the country. Sourcing and retailing are two different steps in the business altogether, he said, but one thing could lead to the other.

Even nine months after the policy was cleared by the Union Cabinet, not a single FDI proposal has come to the government so far. Now, the government may go to the Cabinet to change the contours of the policy.